T-Mobile US (TMUS) Tops Q3 Earnings Estimates, Lifts View
T-Mobile US Inc.TMUS reported mixed financial results in the third quarter of 2016, with both the top and the bottom line surpassing the Zacks Consensus Estimate.
T-MobileUScontinues to gain postpaid wireless customers, which has encouraged management to raise the subscriber gain outlook for 2016. Notably, this Zacks Rank #3 (Hold) company competes with the likes of Verizon Communications Inc. VZ , AT&T Inc. T and Sprint Corp. S in the highly price-sensitive U.S. wireless market. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
GAAP net income in the reported quarter was $366 million or 42 cents per share compared with net income of $138 million or 15 cents in the year-ago quarter. Quarterly adjusted earnings per share came in at 27 cents, above the Zacks Consensus Estimate of 22 cents.
Total revenue increased 17.8% year over year to $9,246 million in the third quarter, below the Zacks Consensus Estimate of $9,441 million. Segment-wise, Service revenues were up 13.2% year over year to $7,133 million. Sales from Equipment totaled $1,948 million, up 37.6% year over year while Other revenues were $165 million, up 25.9% year over year.
Quarterly operating income was $989 million compared with $513 million in the year-ago quarter. Operating margin in the reported quarter was 10.7% against a mere 6.5% in the prior-year quarter. Adjusted EBITDA was $2,630 million, up 37.8% year over year. Adjusted EBITDA margin was 28.4% compared with 24.3% in the year-ago quarter.
In the third quarter of 2016, T-Mobile US generated $1740 million of cash from operations compared with $1,531 million in the prior-year quarter. Adjusted free cash flow in the reported quarter was $581 million compared with the $487 million in the year-ago quarter.
At the end of the third quarter of 2016, T-Mobile US had $5,352 million of cash and cash equivalents and short-term securities and $27,425 million of debt outstanding compared with $4,582 million and $26,061 million, respectively, at the end of 2015. The debt-to-capitalization ratio at third quarter-end was 42.6% compared with the end of 2015 ratio of 42.4%.
Subscriber Statistics and Other Metrics
As of Sep 30, 2016, the total customer base of T-Mobile US was 69.354 million, up 13.3% year over year. Branded postpaid phone customers totaled 30.364 million, up 6.8%. Branded postpaid mobile broadband customer count was 2.866 million, up a massive 45.8%. Branded prepaid customer count was 19.272 million, up 12.3%. Wholesale customers tallied 16.852 million, up 23.4%.
In the reported quarter, T-Mobile US added net 0.851 branded postpaid phone customers, 0.118 branded postpaid mobile broadband customers, 0.684 branded prepaid customers and 0.317 wholesale customers. Total net customer addition was 1.970 million, signifying the 14th successive quarter of over one million net customer additions. Out of this, net prepaid customer addition was 0.684 million, highlighting the 11th straight quarter of industry leading net prepaid customer addition.
Quarterly branded postpaid churn was 1.32% compared with 1.46% in the year-ago quarter. Branded prepaid churn was 3.82% versus 4.09% in the prior-year quarter.
Quarterly branded postpaid phone average revenue per user (ARPU) was $48.15 compared with $47.99 in the prior-year quarter. Branded prepaid ARPU was $38.01 compared with $37.46 in the prior-year quarter. Branded postpaid average billing per user (ABPU) was $63.38 compared with $62.96 in the year-ago quarter.
T-MOBILE US INC Price, Consensus and EPS Surprise
For 2016, the company raised its adjusted EBITDA guidance to the range of $10.2 billion to $10.4 billion from the previous $9.8 billion to $10.1 billion. Branded postpaid net customer addition in 2016 has been revised higher to 3.7 million to 3.9 million from the previous range of 3.4 million to 3.8 million. However, capital expenditure guidance for 2016 was narrowed to the range of $4.5-$4.7 billion from the previous $4.5-$4.8 billion.
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